Owing to the mass adoption of new digital technologies, the financial market has changed dramatically. The banking industry has witnessed a steep increase in closing off their physical branches and is allowing customers do their banking on-the-go in purely digital environments such as mobile apps and cashless systems.
Though OB/PSD2 presents many potential benefits, especially to consumers, it also creates inherent challenges, especially for many banking incumbents that face new competition and ways of operating. To navigate the chaos, these banks must often negotiate the following steps:
• Banks no longer possess monopolies on certain data and functions; the nature of how organizations build services engages with ecosystem partners and generates personalized value for customers has changed. Thus, it is important to continually probe the evolving landscape and look for new business opportunities.
• Rapid assessment of an opportunity’s impact and decide whether to pursue it. In order to exploit this opportunity, one needs to react at a faster speed than competitors.
• Learn from the early adopters and iterate the product.
At a foundational level, the limiting factor in this process is how quickly an organization can build new interfaces between software platforms, i.e., how well it can leverage APIs. This causes the value of data to be limited to internal innovation as well as outside collaborators. In such cases, consumers will often find it difficult to work with such APIs owing to the catalog of exposed legacy services of different styles and formats. This may ultimately result in poorly defined, ineffective interfaces—and thus in little-to-no innovation.
The OB implementation explicitly calls for an API management platform to manage the interfaces created for compliance with OB/PSD2. These platforms not only help banks separate the systems of engagement from the core internal systems of record, but they also provide insights to use the APIs, facilitate developer access, and granular control over permissions. Thus, API management helps APIs to be more than just crude connectors into a product that allows developers to create innovative financial services swiftly.